Defense Ministry top-dog arrested on embezzlement charges

Russia’s Investigation Committee arrested Nikolai Ryabykh in mid-January, following an interrogation he was called to participate in as part of a case on OAO Slavyanka, an Oboronservis subsidiary. Source: Sergey Kuznetsov / RIA Novosti

The biggest anti-corruption campaign in the Defense Ministry in years has yielded its first arrest, at the agency’s very top. The head of the ministry’s Facilities Department has been placed behind bars for two months.

New arrests have
been made as part of the high-profile criminal case connected with fraudulent
schemes carried out by OAO Oboronservis. Along with other big-shots in
the military, one of the first people to be put behind bars as part of this
case is a current high-ranking official in the Ministry of Defense. Following a
court decision, Nikolai Ryabykh, head of the ministry’s Facilities Department,
has been taken into custody.

Russia’s
Investigation Committee arrested Nikolai Ryabykh in mid-January, following an
interrogation he was called to participate in as part of a case on OAO
Slavyanka, an Oboronservis subsidiary. In 2010, this company closed a contract
with the Russian Defense Ministry’s Facilities Department for servicing one of
the ministry’s bases on Moscow’s Kolymamazhny Pereulok.

Although the
building was undergoing major refurbishment, Nikolai Ryabykh paid for
maintenance work that was never carried out. The recipient of these funds was
Slavyanka’s subcontractor, ZAO Bezopasnosti I Svyazi (BIS), which belongs to
Alexander Yelkin and Andrei Lugansky; both owners are now under arrest. As a
result, 18.5 million rubles ($611,000) were transferred to the company’s
accounts, which was then cashed in by various fly-by-night companies and
stolen.

Elkin was
arrested in November 2012, on the day before his 50th
birthday. There were 250 people on the guest list to his party, and former
Defense Minister Anatoly Serdyukov was one of the guests of honor. Rumor has it
that the birthday boy and his guests were entertained by none other than
Jennifer Lopez.

During the
interrogation Ryabykh agreed to give testimony, but he did not admit his guilt.
Despite this, the court has remanded him in custody for two months.

The company BIS
hit the headlines two months ago, when it became clear that 53 million rubles
($1.7 million) had been stolen from funds set aside for maintaining buildings
in military zones under state contracts.

Former head of
the military, Anatoly Serdyukov, is one of the witnesses in the criminal cases
against officials working at Russia’s Defense Ministry. Employees performing
management functions at OAO Oboronservis and its subsidiaries, including in OAO
Slavyanka, are also on the witness list. Following the results of this case,
Russia’s Investigation Committee is planning to file a personal case against
the former minister. Serdyukov has already been called in for questioning, but
he refused to give testimony, basing his decision on Article 51 of the Russian
Constitution.

Meanwhile, though
they may be being held in detention centers, those accused in the criminal case
for embezzlement of Defense Ministry funds continue to earn money from state
contracts. Alexander Elkin’s BIS won a multi-million contract for major refurbishment
to be undertaken in the Federal Tax Service’s administration buildings in
Moscow. The company is also in the running for several multi-million contracts
for the Investigation Committee of Russia in Moscow.

“Of course, it is
regrettable that the company has become embroiled in the scandal. But we have
never had any complaints against them,” says Igor Kucherenko, an employee at
the Investigation Committee responsible for state purchases. According to
Kucherenko, BIS has also won tenders for carrying out various construction jobs
for the tax service and had put itself forward as a reliable partner.

According to
Dmitry Abzalov, vice president of the Center for Strategic Communications, net
profit for carrying out one state contract is the small part of its total cost.

“As a rule, the
average profit is 5-7 percent of the cost of the contract, taking into account
all expenses,” says Abzalov. “But it’s important to remember that construction
and equipment supplies are the most corrupt schemes.”

According to the
chairman of the National Anti-Corruption Committee, Kirill Kabanov, the lack of
transparency in the system for managing Russian state structures creates the
perfect conditions for its abuse, which comes to the fore when tenders and
auctions are being held.

According to
Kabanov, businessmen and corrupt officials prey on suspicious-looking tenders
and divide up to 60 percent of the contract amongst themselves.

“This is the principle Bezopasnosti I Svyazi were
working on when they collaborated with the Defense Ministry,” he says. But, in
our country, there is no law to say that companies involved in corruption
scandals are banned from undertaking state contracts.”